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Australian crude oil imports could decline by 5% in next years

Asian crude oil supplies to Australia peaked in December 2007 and declined by 8% pa since then. Two thirds of current crude imports come from a group of countries whose exports to Australia peaked already in November 2005 and declined by 5.8%. pa, despite a slight uptick in Malaysia and Indonesia. Australia managed to offset this decline by importing increasing quantities of crude from the UAE, New Zealand and a handful of far-away countries like Russia, Azerbaijan, Libya, Algeria and Nigeria. If this compensating growth came to an end – while assuming the underlying decline would continue – the overall decline rate of Australian oil imports would be around 5%. The current import increase of 11% over the last 12 months (almost back to 2007 levels) would be absolutely unsustainable.

australian_crude_oil_imports_jan2004_jun2010

Australian refineries now depend by 2/3 on crude oil imports. In November 2005, Australian crude oil imports from a group of countries, including Saudi Arabia and comprising 93% if total imports, peaked at 414 kb/d and declined since then by 5.8% pa. Crude imports from Asian countries peaked 2 years later in December 2007 and declined since then by 8% pa. This was well before the collapse of Lehman Brothers in September 2008.

Since end 2005, Australia was remarkably successful in compensating this decline by importing increasing quantities from other suppliers, albeit from far away corners of the world. Supply lines have become longer:

australian_crude_supply_lines

Biggest supplier in this compensating group was UAE. It replaced Saudi Arabia where exports peaked in 2005 as described in this previous post: http://www.crudeoilpeak.com/?p=1738 As for UAE’s overstated oil reserves see “OPEC’s oil reserves revisited” http://www.crudeoilpeak.com/?p=355 This makes Australia’s refineries again more vulnerable to OPEC’s reserve risk as well as geopolitical events in the Middle East.

Amazing is the contribution from New Zealand’s 2nd oil boom, in particular the new Tui and Kupe fields.

nz_oil_production_1970_2008_crownminerals

http://www.crownminerals.govt.nz/cms/pdf-library/about/Anual%20Report%202008-2009.pdf

But these fields are offshore and decline is fast as can be seen in this estimate for the period up to 2020 (NZOG’s share is 12.5%)

nzog_production_2007_2020

http://www.nzog.com/f7,151719/151719_NZOG_Company_Profile_2010.pdf

Please note that Kupe  produces more gas (red) than oil and that this is mostly condensate and LPG, not crude oil.

The 3rd group of countries now supplying increasing quantities of crude include Russia, Azerbaijan, Libya, Algeria and Nigeria. We know the problems in some of these countries.

australian_crude_oil_imports_jan2004_jun2010_profiles

The above graph shows the individual crude import profiles by country. Clearly visible is the decline from Saudi Arabia and how UAE replaced it. Most critical was the decline from Vietnam. Imports from Indonesia and Malaysia are on an undulating plateau but their crude oil production peaked in 1998 and 2004 respectively while demand in these countries is increasing due to growing population. See menu item “Net Oil Exports”. We may experience declines in these countries as has already happened.

Direct diesel imports have reached a bumpy plateau with an initial peak in February 2009.

australian_diesel_imports_by_country_jan2004_jun2010 It is remarkable that imports from Singapore have not substantially increased (competition with China?) but that increasing quantities come from Japan and Korea.

In the case of Japan we can safely say that Australia is gobbling up the diesel Japan is saving.

Direct petrol imports, mainly from Singapore, peaked end 2009

australian_petrol_imports_by_country_jan2004_jun2010

In order to assess the vulnerability of these supplies one would have to analyse crude oil imports to Singapore. That is a topic for another story.

Conclusion: It will be increasingly difficult for Australia to import crude oil in future. A 5% decline in crude oil imports would endanger the medium term viability of one of Australia’s oil refineries. Such a decline rate would also be too high to be offset by fuel efficiency improvements or electric car transition programs as assumed by the RTA in their final report on the M2 widening.

Investors who should still consider financing this unnecessary project, especially after spectacular failures of other tollways, are advised to do what the RTA failed to deliver: a detailed fuel availability analysis for the vehicles using the M2, for 30 years, the timeframe used in the Cost Benefit Analysis. It would be useful if readers of this post could write to their banks and/or super funds to do such calculations in relation to their investments.

The decline rate also demonstrates how unrealistic the whole population growth debate is because a growing car fleet is incompatible with declining oil production.

Rail development and conversion of our truck fleet to CNG/LNG have become ever more urgent.

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